Skip to main content
Log in

The Role of Retail Prices and Promotions in Determining Cigarette Brand Market Shares

Review of Industrial Organization Aims and scope Submit manuscript

    We’re sorry, something doesn't seem to be working properly.

    Please try refreshing the page. If that doesn't work, please contact support so we can address the problem.

Abstract

Over the past two decades, two forms of price competition have emerged within the cigarette industry: the introduction and spread of discount and deep discount cigarettes and the increased use of price-related promotions. In this paper, we use quarterly market-level, scanner-based data on cigarette prices, promotions, and sales for 50 US markets over the period from 1994-IV through 2002-II to examine the impact of price and promotions on market shares for premium, discount, and deep discount brand cigarettes. Our estimates indicate that changes in relative prices, including those resulting from promotions, account for much of observed changes in market shares.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • S.S. Adid M. Silver (1999) ArticleTitle‘Modeling Market Shares by Segments Using Volatility’ Journal of Applied Statistics 26 IssueID5 643–660 Occurrence Handle10.1080/02664769922296

    Article  Google Scholar 

  • Altria (2005). 2004 Altria Group Inc., 2004 Annual Report. New York: Altria Group Inc.

  • T.S. Breusch A.R. Pagan (1980) ArticleTitleThe Lagrange Multiplier Test and its Application to Model Specification in Econometrics’ Review of Economic Studies 47 239–254

    Google Scholar 

  • Bulow J.and P. Klemperer (1998) ‘The Tobacco Deal, Brooking Papers on Economic Activity. Microeconomics 323–394

  • Commission Federal Trade (2005) Cigarette Report for 2003 Federal Trade Commission Washington DC

    Google Scholar 

  • K.M. Gaver D. Horsky C. Narasimhan (1988) ArticleTitle‘Invariant Estimators for Market Share Systems and Their Finite Sample Properties’ Marketing Science 7 IssueID2 169–186 Occurrence Handle10.1287/mksc.7.2.169

    Article  Google Scholar 

  • Kluger, R. (1997) Ashes to Ashes, Vintage.

  • InstitutionalAuthorNameNational Associationof Attorneys General (2003) Model Complementary Legislation: Introduction and Analysis National Association of Attorneys General Washington DC

    Google Scholar 

  • InstitutionalAuthorNameNationalCenterforTobacco Free Kids (2002) U.S. Cigarette Companies’ Settlement-Related Price Hikes are Excessive National Center for Tobacco Free Kids Washington DC

    Google Scholar 

  • Price, Waterhouse, Coopers (2004) Independent Auditor’s Notice of Revised Final Calculations for the Tobacco Litigation Master Settlement Agreement’s Subsection IX(c)(1) Account Payments Due April 15, 2002 – Notice ID: 0141.

  • InstitutionalAuthorNameSpecComm International, Inc. (2000) 2000 Maxwell Tobacco Fact Book SpecComm International. Incorporated Raleigh NC

    Google Scholar 

  • InstitutionalAuthorNameSpecComm International Inc. (2004) 2004 Maxwell Tobacco Fact Book SpecComm International. Incorporated Raleigh NC

    Google Scholar 

  • U.S. Census Bureau (1997) Manufacturing: General Summary, 1997 Economic Census, Manufacturing, Summary Series, (EC97M31S-GS).

  • U.S. Census Bureau (1997) Merchandise Line Sales, 1997 Economic Census, Retail Trade, Subject Series, (EC97R44S-LS(RV)).

  • U.S. Census Bureau, (2002) Cigarette Manufacturing: 2002; 2002 Economic Census, Manufacturing, Industry Series, (EC02–311–312221 RV).

  • U.S. Census Bureau (2002) United States Retail Trade: 2002; 2002 Economic Census, Retail Trade, Geographic Area Series, (EC02–44A-1US).

  • U.S. Department of Health and Human Services (2000) Reducing Tobacco Use: A Report of the Surgeon General. Atlanta: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health.

  • U.S. Federal Trade Commission (2005) Federal Trade Commission Cigarette Report for 2003. Washington DC: U.S. Federal Trade Commission.

  • A. Zellner (1963) ArticleTitle‘Estimators for Seemingly Unrelated Regression Equations: Some Exact Finite Sample Results’ Journal of the American Statistical Association 58 977–992 Occurrence Handle10.2307/2283326

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Richard M. Peck.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Tauras, J.A., Peck, R.M. & Chaloupka, F.J. The Role of Retail Prices and Promotions in Determining Cigarette Brand Market Shares. Rev Ind Organ 28, 253–284 (2006). https://doi.org/10.1007/s11151-006-0016-6

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11151-006-0016-6

Keywords

Keywords

Navigation